Federal laws and the laws of many states require that every franchise company submit to prospective franchisees a document that specifies in detail the terms under which franchisor and franchisee will do business together. This contract is commonly known as the franchise agreement. By establishing standards of operation, the agreement helps to both alert a franchisee as to what is expected of him or her as well as to ensure system-wide uniformity throughout a franchise. This material presented can be a bit daunting, but it can help you make the most informed final decision possible.

The franchise agreement is given to a prospective franchisee at the same time as the offering circular. Your attorney will need to review the agreement. Below are just a few of the issues you will see covered in a franchise agreement:

• Terms--How long is the agreement to be in effect? Five years? Twenty years? Forever?
• Maintenance and repair--Clauses that require franchisees to make certain repairs and upgrades to keep their units up to current standards.
• Insurance-Sections that require franchisees to have certain types of insurance such as general liability, worker's compensation, and property insurance.
• Acknowledgement of receipt of documents-FTC Rules state that the prospective franchisee must be presented with an offering circular 10 business days before the execution of a franchisee agreement or payment of any money and a completed franchise agreement five business days before acceptance.